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Reality Check: Scarce Talent

on March 30, 2009 Source: Policy Dialogue on Entrepreneurship

The $787 billion economic stimulus package includes largeinvestments in innovation in areas such as energy, health IT, andbroadband. Developing these new technologies will be scientists andengineers, but here’s a reality check: we don’t have enough of them.Although increasing the number of U.S. scientists and engineers is amust, in the shorter term, we need a quicker fix: more high-skilledimmigration.

The U.S. has been depending on foreign graduatesfrom our universities for much of the innovative and entrepreneurialactivities in our economy (think, for example, Google, Intel, eBay,Yahoo and Sun Microsystems whichwe profile this week). The contribution of high-skill immigrants to theeconomy has been studied in detail. For example, a recent Harvard analysis ofthe 2000 Census shows that immigrants represent only 12 percent of thetotal workforce, but 47 percent of all scientists and engineers withdoctorates. This last proportion is likely to rise since 67 percent ofall those who entered the fields of science and engineering between1995 and 2006 were immigrants. The Small Business Administration recentlyrevealed that immigrants are disproportionately prone toentrepreneurship: they represent 12.5 percent of all business ownersand are 30 percent more likely to start a business than native citizensare. Moreover, they generate 11.6 percent of all business income in theU.S. and own 11.2 percent of businesses with at least $100,000 in sales.

Vivek Wadwha fromDuke and Harvard has been pointing to these and other important trends.His research has shown that immigrants founded 25 percent of all and technology companies started between 1995 and 2005,including half of those in Silicon Valley. In 2005 alone, immigrants'businesses generated $52 billion in sales and employed 450,000 workers.Furthermore, almost a quarter of all international patent applicationsfiled from the U.S. in 2006 named foreign nationals as inventors.Scholars Jennifer Hunt and Marjolaine Gauthier-Loiselle even argue thatthat a 1% point increase in immigrant college graduates should lead toan increase in patents per capita of 9%-18%.

Despitethe strong evidence in favor of more highly-educated immigrants, ourpolicies have been sending the opposite signal.  Currently, only 85,000visas a year are allocated to the sort of skilled workers the economyneeds. If these high skilled immigrants want to stay permanently, theyhave to apply for permanent residency status. This can take years and cost thousands of dollars to obtain. One study foundthat hundreds of thousands of foreign graduates with technical majorsconstrained by green card and H-1B constraints might have added almost$14 billion to the nation’s GDP in 2008 and some $3 billion to thefederal treasury. Unfortunately, the final stimulus bill that emergedon Capitol Hill contained a worrisome provision on immigration thatwould restrict financial institutions that receive federal bailoutfunds from applying for H-1B visas to hire high-skilled immigrants.This sends a bad signal to other sectors of our economy and couldhinder economic recovery.

Not surprisingly, high skilled immigrants and students are looking for opportunities elsewhere. A recent survey of1,224 foreign nationals who are currently studying in institutions ofhigher learning in the U.S. or who had graduated by the end of the 2008academic year revealed that very few would like to stay in the U.S.permanently: only 6% of Indian, 10% of Chinese, and 15% of Europeans.The U.S. faces increasing competition in the global labor market fromother OECD countries, and, more significantly, from the growingeconomic opportunities available to university-degreed professionals intheir home countries.

It is unfortunate that the debate onimmigration has so far focused primarily on low-skill immigration. Theevidence above shows what is at stake. We hope to alert policymakersabout this pressing issue on April 6th when we hold our next PolicyDialogue on Entrepreneurship briefing. Vivek Wadhwa, Tim Kane from theKauffman Foundation and Amir Hudda, a technology entrepreneur, willdiscuss how friendlier immigration policies today can help heal oureconomy (more details on registering for this event at

Jobgeneration and innovation are in everybody’s interest. Companies cannotwait for changes in our education system to yield results. Firms havingdifficulties hiring a talented workforce might decide to relocate.While we need improvements in our education system, in the short termwe should welcome foreigners who look to the U.S. as a place to learnand apply their skills.


Jonathan Ortmans is a senior fellow at the Kauffman Foundation where he focuses on public policies to promote entrepreneurship in the U.S. and around the world. In addition, he serves as president of the Public Forum Institute, a non-partisan organization dedicated to fostering dialogue on important policy issues.

Category:  Global  Immigration  Workforce  Tags:  sba, harvard, duke, sun microsystems, kauffman foundation

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